Tax planning for your estate can help you avoid large federal taxes that decrease your assets.
As you start estate planning and deciding how to transfer the assets you’ve accumulated in your lifetime, it’s essential to remember how estate taxes may come into play. Taxes can reduce the size of your estate and disrupt the plans you have for what you leave behind to your family or favorite charities. Tax planning for your estate is a critical part of planning for the future and your family’s inheritance. Your lawyer at The Millman Law Group can help you understand the different types of taxes to be aware of and guide you through processes that help you avoid excess taxes. When you meet with your estate planning attorney, ask about the following taxes and how you can plan to avoid their negative consequences.
Federal Estate Tax
Tax planning for your estate considers several types of transfer taxes at the federal and state level. Florida has no state estate tax, but you are still subject to federal taxes.
For instance, the transfer of your taxable estate (which includes assets like cash, securities, and other properties) may be subject to estate tax upon your death. This occurs if the value of your taxable state surpasses the federal exemption limit. However, assets inherited by a spouse are often not subject to estate tax due to the unlimited marital deduction.
Gift Taxes
When you give money or other assets away without receiving anything in return, you may be subject to gift tax. This again applies if your lifetime gifts, including your estate, exceed the current federal exemption amount. Gifts to your spouse are excluded from the tax.
There is an annual exclusion amount you can give before triggering gift taxes. In 2022, that is $16,000 per person per year, and there is no limit to the number of different gift recipients.
Generation-Skipping Transfer Taxes
If you give money to your grandchildren or relatives two or more generations after you or a non-family relation more than 37.5 years your junior, you may see GST tax. When gifts skip a generation and are outside the exclusion amount, GST tax applies the highest federal estate tax rate on that asset transfer.
How Tax Planning Helps You Minimize Your Burden
When tax planning for your estate, you can find a number of ways to decrease the amount of tax due and ensure that most of your estate and assets are passed down. A few techniques for reducing your estate taxes include:
- Remove assets from your taxable estate every year by giving to your heirs. You can also pay for medical or tuition bills without being subject to taxes if the payments are made directly to the school or medical facility. This lets you support your family while shrinking your future taxable estate.
- Establish a dynasty trust to pass down your assets far into the future. In Florida, the trust can last for as long as 360 years, serving a potential 18 generations.
In Florida, the considerable lifespan of the dynasty trust combined with no estate tax means that your trust will remain as tax-free as possible. You can allow the knowledgeable lawyers of The Millman Law Group to administer your trust and secure your financial status and future.
Estate Planning Made Easy With Millman Law Group
Millman Law Group, PLLC is rare because it’s one of the only law firms that offer life planning in South Florida. From life care planning to the preparation of detailed estate plans, Millman Law Group has committed to serving Floridian elderly communities in Boca Raton, Palm Beach County, Ocean Ridge, Hillsboro Beach, and many other areas since 2018. Our dedicated team also specializes in special needs trusts and catering to any age demographic because we know for certain it’s never too early to start preparing you and your family for your future. For the latest news in estate planning and elder care law, follow us on Facebook, Twitter, Linked In, and Pinterest. You can also contact us at 561-463-6480.